Corbett's Cabinet members grilled over state budget

Democratic senator calls governor's proposal a 'house of cards.'

HARRISBURG — In separate hearings Tuesday, Democrats grilled members of Gov. Tom Corbett's Cabinet over the Republican administration's proposed $28.4 billion budget that ties funding increases to overhauls of the state pension, liquor and lottery systems.

Corbett's team defended the spending plans, first in the Senate Appropriations Committee, where Budget Secretary Charles B. Zogby testified in the morning, and then in the House Appropriations Committee, where Revenue Secretary Dan Meuser testified in the afternoon.

The polite and respectful give-and-take on the first day of budget talks between the Legislature and administration hinted at a long, contentious spring session. For Corbett's proposals to take effect, enough Democrats would have to side with the GOP-controlled House and Senate by the June 30 fiscal deadline for a final spending deal.

Sen. Jim Ferlo, D-Allegheny, called the budget proposal a "house of cards" highlighted by a plan to privatize the state lottery's management that Democratic Attorney General Kathleen Kane ruled was illegal.

"I appreciate your candor," Zogby replied. "But it is not a house of cards."

Corbett's $28.4 billion spending plan for 2013-14 is a 2.4 percent increase over this fiscal year and does not call for a tax increase.

Corbett's budget funds higher education and offers public schools an extra $90 million in their basic per pupil subsidy.

His education spending plan also calls for a new $200 million school grant next school year. It's part of a four-year, $1 billion grant program that only would kick in if the Legislature agrees to sell the state liquor store system.

Corbett also would change the state's pension systems for workers and school employees. The two plans have combined long-term deficits of $41 billion. To cut into that deficit and free up $175 million in revenue next fiscal year, current employees would have their future benefits reduced, and new employees would be placed into a new retirement system akin to a private sector 401(k) starting in 2015.

Corbett's budget proposal also included $50 million in added spending for senior programs. It was tied to the administration plan to allow a British firm, Camelot Global Services, to run the lottery's management component.

But the state no longer has Camelot's money. After the House hearing, Meuser said the state returned the $50 million on Monday. The state is reviewing its legal options in the wake of Kane's ruling last week.

Meuser also told lawmakers the $50 million was just part of the $3 billion the state stands to fund programs for the increasing senior population if the state loses the Camelot contract.

But Rep. Madeleine Dean, D-Montgomery, said the state would be saving money for seniors because it would not have to spend management fees on an outside company.

During the morning Senate hearing, Sen. Vincent Hughes, D-Philadelphia, minority chairman of the Appropriations Committee, quizzed Zogby on why Corbett was not accepting federal money to expand Medicaid coverage, as some Republican governors have done.

Zogby said those states may have accepted the money to provide health care for children — something Pennsylvania does under its successful Children's Health Insurance Program, which would get $8.5 million more under Corbett's budget.

Zogby also said the federal government has a history of promising to pay for programs and then does not.

Sen. John Gordner, R-Columbia, asked Zogby to explain potential costs and savings associated with the pension plan, since it could be challenged in court by unions if the Legislature approves it.

Zogby said there could be some incremental costs associated with starting up a new pension system for new hires. But if Corbett's changes are not made, he said, costs would be even steeper because the budget would have to be cut or taxes would have to be increased, and the governor does not want to do either.

Sen. Judith Schwank, D-Berks, said Zogby and Corbett have criticized school districts in the past for using federal stimulus dollars to help cover payroll for employees. Now, it appears Corbett will cause the same type of budget problem by offering school districts short-term grant money by selling liquor stores.

Districts have been advised to use the money only for major purchases, such as new security cameras, installing a new chemistry room or staff training, Zogby said. But even if districts did that, Schwank said, they still would have to hire the staff to run those new programs.

Later Tuesday, Rep. Mike Turzai, R-Allegheny, unveiled a new bill to privatize the state's liquor stores.